It's Important To Follow These Specific Steps When Using Gift Funds For Your Down Payment

As lenders tighten mortgage guidelines for Atlanta home buyers, minimum downpayment requirements are increasing.

Several years ago, you could finance a home with nothing down. Today, most conventional mortgages require at least 5 - 10 percent.

Incidentally, these guideline changes have led to an increase in the number of home buyers accepting cash gifts from family.

Gifts are allowed in most cases but the problem is, if you don't accept the gift in a "lender-friendly" way, the mortgage underwriter could reject it, and negate it.

Three Steps To Success With Your Down Payment Gift Funds

You can't just deposit a cash gift into your bank account. You have to follow a series of steps and keep records.

1. Provide an acceptable gift letter signed by all parties
2. Provide documentation of the gifter's withdrawal of funds via teller receipts
3. Provide documentation of the giftee's deposit of funds via teller receipts

Lenders require these 3 steps for two basic reasons.  First, they want to make sure that the cash gift is "clean" (i.e. not laundered).  Second, they want to make sure the gift is really a gift and not a loan-in-disguise. It's why lenders typically require that the loan application be accompanied by a signed, dated letter.

For example:

I am the [relationship to recipient] of [name of recipient] and this letter serves as evidence that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property]. This is a gift -- not a loan -- and there is no expectation of repayment. Signed, [Signature of gifter]

Keep The Cash Gift Funds Separate From Your Other Money

As an additional step, home buyers receiving cash gifts should make sure that gifted funds are not commingled at the time of deposit.

If the cash gift is for $10,000, therefore, the bank's deposit slip should indicate that a $10,000 deposit was made -- nothing more, nothing less. Don't add a random $100 deposit to the transaction, in other words. The $100 deposit should be a separate transaction.

It's also worth noting that gifting funds between family members can create both legal and tax liabilities.

If you're unsure about how donating or receiving a gift may impact you, call or email me directly. If I can't help you with your questions, I can refer you to somebody that can.

These Overlooked Issues Can Become Deal-Killers For Your Mortgage Application

A mortgage loan approval is never final until it's funded. And that means after you've signed the final paperwork and the bank has wired funds to escrow.

Mortgages are made up of many moving parts, any of which might "go wrong" while your home loan is underway.

Some are in your control, like deciding to purchase new items on credit during the mortgage process, many more are not. These "not in your control" items are the ones that you may not be thinking of.

Just being aware of some potential pitfalls could help save your loan down the road, and your peace of mind today.

What Many Mortgage Articles Don't Say

Many mortgage related articles offer similar things like buying a car before closing, or opening a bunch of new credit cards, but there are  more uncommon factors that can lead to a similar loan turndown.

For example, a home not be able to get approved if it's unsuitable, or unsafe, for human habitation -- a condition you may not discover until after a thorough home inspection's been made.

Broken windows, lack of plumbing, major electrical code violations and/or major foundation damage are all deal-breakers with a lender. 

You'll either have to fix the home prior to your loan closing, or don't close at all.

More Mortgage Pitfalls To Avoid

There are others ways in which a mortgage approval can go bad, too:

• You're self-employed and your income was declining over the years leading up to your mortgage application
• Your tax return shows large amounts of unreimbursed employee expenses
• You have switched lines ofwork or had unexplained breaks of employment in recent years

Mortgage approvals are delicate and, despite an improving economy, lenders still operate with caution. Talk with your real estate agent and your loan officer and put together a game plan.

The best way to beat the mortgage system is to know the rules before you start to play.

And the best way to know the rules is to speak with your trusted mortgage professional today!

3 Tips To Get The Best Results On Your Mortgage Application

Although the financial markets have tightened lending guidelines and financing requirements over the last few years, the right advice when applying for your loan can make a big difference.

Not all loans are approved. And even when they aren't approved immediately, it doesn't have to be the end of your real estate dreams.

There are many reasons why a mortgage loan for the purchase of your real estate could be declined.

Here are a few things to understand and prepare for when applying for a mortgage:

Loan-to-Value Ratio

The loan-to-value ratio (LTV) is the percentage of the appraised value of the real estate that you are trying to finance.

For example, if you are trying to finance a home that costs $100,000, and want to borrow $75,000, your LTV is 75%.

Lenders generally don't like a high LTV ratio. The higher the ratio, the harder it normally is to qualify for a mortgage.

You can positively affect the LTV by saving for a larger down payment.

Credit-to-Debt Ratio

Your credit score can be affected negatively, which in turn affects your mortgage loan if you have a high credit-to-debt ratio.

The ratio is figured by dividing the amount of credit available to you on a credit card or auto loan, and dividing it by how much you are currently owe.

High debt loads make a borrower less attractive to many lenders.

Try to keep your debt to under 50% of what is available to you. Lenders will appreciate it, and you will be more likely to get approved for a mortgage.

No Credit or Bad Credit

Few things can derail your mortgage loan approval like negative credit issues.

Having no credit record can sometimes present as much difficulty with your loan approval as having negative credit.

With no record of timely loan payments in your credit history, a lender is unable to determine your likelihood to repay the new mortgage.

Some lenders and loan programs may consider other records of payment, like utility bills and rent reports from your landlord.

Talk to your loan officer to determine which of these issues might apply to you, and take the steps to correct them.

Then, you can finance the home of your dreams.

Breaking News Georgia Will you miss your chance to get a new loan up to 125%? Program to end soon

Breaking News Loan up to 125% on the HARP or Home Affordable program set to expire June 2011

H.A.R.P. Home Affordable Program

The Home Affordable Program is designed for homeowners who pay their mortgage on time but are not able to refinance because they have little or no equity in their home. But hurry this program is set to expire and many lenders do not understand the program or are too busy with the REFI boom to help you close your loan.

We understand and can help see ATLrates.com or call 770-792-7979  or  Outside Atlanta call 1-800-792-0068

You must meet the following criteria to qualify for the Home Affordable Program:

1. Your current loan must have been sold to Fannie Mae or Freddie Mac.  To find out, contact your current loan servicer or visit: http://www.makinghomeaffordable.gov/loan_lookup.html
   
   
2. During the last 12 months, all of your mortgage payments must have been made within 30 days of the due date.
   
   
3. Your new loan amount may not exceed 125% of the current appraised value of your home. 

To view rates and obtain a good faith estimate for a Home Affordable refinance with ATLRATES.com.


Frequently Asked Questions

If I have a first and a second mortgage, do I still qualify?

As long as the balance due on the first mortgage is less than 125% of the value of the home, you may qualify.  The lender on the second would have to agree to subordinate their loan to the new first mortgage, thereby remaining in second position.

Can I get cash out to pay off debts?

No.  However, provided the new loan amount will not exceed 125% of the value of the home, you may include all closing costs in the new loan so you don’t have to come out of pocket with any cash.

If I’m delinquent on my mortgage, will I still qualify?

No.  Borrowers who are currently delinquent on their mortgage should contact their current lender/servicer and ask about a loan modification.

Will I need mortgage insurance?

If your existing loan does not have Private Mortgage Insurance (PMI), it will not be required as part of your HARP refinance either. If your existing loan has PMI, your HARP refinance will also require it. PMI for this program will only be available through your existing PMI company.

Below are the HARP PMI guidelines of the major PMI companies:

HARP REFINANCE PMI GUIDELINES
Existing PMI Company	Refinance with New Lender	Refinance with Existing Lender
Genworth (Formerly GEMICO)	Max 105% LTV	Max 125% LTV
	45% Max DTI	Per AUS Approval
	New Premium	Same Premium
MGIC	Max 105% LTV	Max 125% LTV
	45% Max DTI	Per AUS Approval
	Same Premium	Same Premium
	.5% Upfront Fee
PMI	Max 125% LTV	Max 125% LTV
	Per AUS Approval	Per AUS Approval
	Same Premium	Same Premium
Radian	Max 105% LTV	Max 125% LTV
	45% Max DTI	Per AUS Approval
	New Premium	Same Premium
UGI	Not Available	Max 125% LTV
		55% Max DTI
		Same Premium
RMIC	Max 105% LTV	Max 125% LTV
	55% Max DTI (41% if Mtg payment increases)	No DTI Requirement
	New Premium	Same Premium

How long will the Home Affordable Program be available?

The program expires on June 30, 2011. Your refinance transaction must be closed and funded on or before that date.

Fannie Mae Guidelines Change Monday. Apply Today To Lock In To "Old" Rules.

Fannie Mae rolls out new mortgage guidelines Monday. Therefore, if you're in the process of applying for a conforming home loan, consider giving your complete application by the close of business Friday.

All Fannie Mae applications taken on, or after, December 13, 2010, are subject to the changes.

As compared to mortgage guidelines updates of the last 3 years, Monday's roll-out is relatively small. There is no change to the maximum debt-to-income ratio, for example; nor is there an increase in the minimum FICO score requirement.

Most mortgage applicants in Atlanta and nationwide will be unaffected.

Others, however, will find getting approved to be more difficult.

The most major change is with respect to revolving and installment debt. This category includes credit cards, charge cards, and student loans, among others. Going forward:

1. Debt with fewer than 10 payments remaining must now be included in an applicant's monthly obligations.
2. Debt not reporting a monthly payment must be assigned a payment equal to 5% of the outstanding credit balance.

These edits will raise applicants' debt-to-income ratios, and may push some of them beyond the maximum allowable limits, resulting in a denial. People with relatively large car payments are especially susceptible.

Another change relates to receiving gift funds for a purchase. Unlike debt calculations, though, the "gifting" process is getting easier.

Under the new Fannie Mae guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae's customary, minimum 5% downpayment contribution from personal funds. Downpayments can be comprised 100 percent of gifted and/or granted monies.

Buyers of second or investment homes, or multi-unit properties must still make a 5% downpayment from their own funds.

And, lastly, Fannie Mae is easing some of its documentation requirements. Salaried applicants from whom commissions and/or bonuses paid account for less than 25% of annual income will have fewer paystubs to produce for underwriting.

Fannie Mae's complete guideline changes are available online at http://efanniemae.com.

Fed Survey : Mortgage Guidelines Tighten Further, Freeze Out Would-Be Refinancers

It's getting tougher to get approved for a mortgage. Still.

In its quarterly survey of senior loan officers around the country, the Federal Reserve asked whether "prime" residential mortgage guidelines" have tightened in the prior 3 months.

A "prime" borrower typically carries a well-documented credit history with high credit scores, has a low debt-to-income ratio, and uses a traditional fixed-rate or adjustable-rate mortgage.

For the period July-September 2010, 52 of 54 responding loan officers admitted to tightening their prime guidelines, or leaving them "basically unchanged".

Just 4% of banks loosened their lending standards.

If you've applied for a home loan lately -- for either purchase or refinance -- you've likely experienced the effects of the last 4 years. Because of delinquencies and defaults, today's mortgage underwriters are forced to scrutinize income, assets and credit scores, among other facets of an home loan application.

Mortgage applicants in Marietta have higher hurdles to clear:

• Minimum credit scores are higher versus last year
• Downpayment/equity requirements are larger versus last year
• Debt-to-Income ratios must be lower versus last year

In other words, although mortgage rates are the lowest they've been in history, qualification standards are not.  Minimum eligibility requirements are tougher, and appear to be toughening still.

If you're among the many people wondering if now is the right time to join the Refinance Boom, or to buy a home, consider that, while mortgage rates may fall further, eligibility standards may not.

Low mortgage rates don't matter if you can't qualify for them

Fannie Mae Rolls Out New Lending Rules December 13, 2010

Starting Monday, December 13, 2010, Fannie Mae is changing its mortgage lending guidelines.

For some mortgage applicants of Georgia , the loan approval process will simplify. For others, it will toughen. How you'll be affected personally will depend on your credit profile and your loan characteristics.

Among the biggest changes from Fannie Mae is a new set of guidelines for gift funds. When the new rules roll out, accepting cash gifts for downpayment will be easier.

Undetr the new guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae's typical, minimum 5% personal downpayment contribution. Downpayments on homes meeting the above criteria can be comprised of 100% gifted and/or granted funds.

Buyers of second homes and multi-unit properties, however, are not exempt.

There's also two changes pending with respect to revolving debt.

1. Debt with less than 10 payments remaining may no longer be waived in debt-to-income ratio calculations
2. Debt lacking a monthly payment on credit must be assigned a payment equal to 5% of the outstanding balance

Both of the above should increase the number of loan denials in 2011.

And, lastly, Fannie Mae changes some of its documentation requirements, the most noticeable of which will be with respect to income verification. Salaried workers and applicants whose commission/bonus accounts for less than a quarter of their income will have fewer paystubs to produce for underwriting.

Loan applications taken prior to December 13, 2010 are exempt from the new rules.

Fannie Mae's complete guideline changes are available online at http://efanniemae.com.

Bank Mortgage Lending Policies Appear To be Easing

The tightening in mortgage-lending policies that characterized the last 3 years appears to be slowing.

According to the Federal Reserve's quarterly survey of senior bank loan officers, roughly 1 in 10 lenders added mortgage qualification hurdles between April and June. It's a huge departure from just 2 years ago when the mortgage industry was facing its first wave of challenges. 

During that period, eight in 10 lenders added hurdles.

For mortgage applicants in Kennesaw , this quarter's Fed survey results signals that mortgage lending may have reached its limits of restriction.

Since 2007, mortgage guidelines have become increasingly restrictive. There's extra scrutiny on assets and tax returns; employment history is given more weight; loan purpose matters.  There's a bevy of traits that can stand between you and an approval that didn't exist a few years ago.

That said, lots of homeowners are still getting loans.

 

Verifiable income, good credit scores and equity are the "magic formula" and banks want to lend to good credit risks. And the best news for those that qualify is that mortgage rates are fantastic right now.

According to Freddie Mac, mortgage rates are as low as they've been in history.

So, if you're among the many wondering if now is the right time to buy a home -- or refinance one -- remember that, although mortgage guidelines likely won't get worse, mortgage rates probably will.